The Pure Gold Company
The Australian quotes Joshua Saul of The Pure Gold Company on the aftermath of the Brexit vote and the surge in customers looking to secure parts of their fortunes against potential post-Brexit economic uncertainty.
Gold prices rose for the second day in a row on Monday, spurred by concerns over what Britain leaving the European Union will mean for the political and economic landscape.
Gold for August delivery settled up 0.2 per cent at $US1,324.70 a troy ounce on the Comex division of the New York Mercantile Exchange, paring some gains after trading as high as $US1,336.60 earlier in the session.
On Friday, 51.9 per cent of Britons voted to leave the 28-nation trade bloc, versus 48.1 per cent who wanted to remain.
The leave vote represented a startling rebuke to the establishment and threatened to spark political turmoil in the UK and more widely across an increasingly fractious eurozone. Investors flocked to buy the metal, which is viewed as a safe-haven in times of market apprehension.
“There’s a lot of uncertainty around, and it’s not surprising there’s been a pick-up in safe-haven buying,” said William Adams, Head of Research at Fast Markets Ltd. “Until there’s less uncertainty I think bullion prices will be supportive.”
On Friday and over the weekend, investors piled into gold in search of a safe place to store their cash as the shock of the referendum results saw global markets descend into chaos.
Users of London-based online bullion platform, BullionVault, traded over $US13.7 million in gold by 6.30am. UK time on Friday, setting a one-day record by midnight. On Saturday and Sunday, 2,766 trades were executed, including some investors taking profit.
“Our users bought a lot of gold going into this crisis, and some are selling to bank substantial profits from Friday’s shock,” said founder and chief executive Paul Tustain.
Elsewhere, fear of a so-called Brexit encouraged demand from investors with little or no experience of financial markets. Gold investment firm The Pure Gold Company has seen a 69 per cent increase in first-time investors, including teachers, doctors and retirees.
“We’ve had people abandon plans to buy properties and other investments and to stick their money into gold,” said chief executive Josh Saul.
Gold’s gains were capped by the stronger dollar, which made the dollar-denominated commodity more expensive to buy for holders of other currencies. The WSJ Dollar Index was recently up 1.1 per cent at 87.54.
Prices are expected to maintain their upward trajectory in the near term as safe-haven demand continues apace.
The metal “remains fundamentally bullish and could be poised to trade higher as the lingering fears over a potential Brexit-fuelled recession encourages buyers to pile on the longs,” said Lukman Otunuga, a research analyst at FXTM brokerage.
Longer term, gold is expected to drift lower again as market fundamentals regain sway over political shocks.
“Unless there are wider economic or financial market consequences, high prices are unlikely to last,” said Carsten Menke, a commodities research analyst at Julius Baer. “History has shown that political events usually do not have a lasting impact on gold but cause short-term deviations from longer-term trends.”
According to Mr Adams, some profit-taking is also expected once markets calm down over Brexit fears.
“Looking forward we would expect choppy trading as the repercussions of the exit-vote unfold, there may well be bouts of profit-taking, but we would expect dips to be well supported,” wrote Mr Adams in a note.
— Dow Jones newswires
Source: The Australian